5 Comments

Summary:

Google has shown a surprising interest in the future of energy, from investing in clean energy, to developing a plug-in vehicle project. But there’s another way that Google could be connected to energy through its search business: as gas prices rise, so do paid search clickthroughs.

HighGas

Updated: Google has shown a surprising interest in the future of energy, from investing hundreds of millions of dollars into clean energy, to developing a plug-in vehicle project. But there’s another way that Google could be connected to energy more directly through its core search business: according to data crunched by Marin Software, as gas prices rise, paid search click-throughs seem to rise, too.

Essentially when gas prices go up, people appear to end up driving less to the store to buy goods, and are likely turning to the Internet to buy more stuff. That’s the assertion that you could make from the five quarters of data that Marin Software has pulled and which shows “a strong correlation (R-Squared = 0.97) between the price of oil and the number of paid-clicks.” (The closer to one the R-Squared figure is, the better the correlation. Zero is a lack of opposite correlation.)

Marin Software, which sells a service to help online advertisers manage their campaigns, found the correlation in the data on its management platform, which includes over 800 clients and $2 billion in advertising spending. You can see from the table above, the ups and downs seem to almost mirror each other.

Perhaps the most clear conclusion of the data is that researchers need to take a deeper dive into pin-pointing the complexities of such a correlation. However, it’s still unclear if rising gas prices would actually boost Google’s bottom line, as Google also is dependent on overall energy prices to power its data centers. That’s precisely why Google has been experimenting so much with different ways to control its energy sources and to produce clean power.

On a side note, while high gas prices might appear to be good for Google’s search business, they are definitely good for lowering carbon emissions and fighting climate change. And that’s also something Google has also pledged to invest in.

Image courtesy of Brownpau, and Marin Software.

  1. I believe R = -1 is an opposite (inverse) correlation and R = 0 is a lack of correlation

    Share
  2. @Brian Leyde, You’re right, I clarified the R = 0.

    Share
  3. This is a logical correlation and if I recall I think Amazon may have seen the same impact that last time gas prices spiked in 2008. Obviously this shifts the cost burden onto the online retailer who still needs to ship physical products but I’d expect they’d deliver it in a more cost-efficent manner, thereby reducing total overall gas consumption (and resulting carbon emissions).

    Share
  4. Matthew Williams Wednesday, May 4, 2011

    R is correlation and R-Squared is the coefficient of determination, which are not equivalent. For your article, the R-Squared indicates 96.69% of the variation in paid clicks can be explained by variation in energy prices.

    Share
  5. High oil and gas prices are likely going to crash this economy (again), just like late 2008.

    That isn’t good for anyone, let alone Google, whose Market Cap was HALVED during the last downturn,

    http://finance.yahoo.com/q/bc?s=GOOG+Basic+Chart&t=5y
    http://finance.yahoo.com/q/bc?t=5y&s=GOOG&l=on&z=l&q=l&c=oil

    Low ~Natural GAS~ prices on the other hand, can help them make power for their data centers cheaper, at HALF the cost of grid power no less.

    Share

Comments have been disabled for this post